Reference no: EM132701770

Problem 1: Under the provisions of ITA 85(1), Jason transferred a piece of land he held personally to a corporation in which he owned all of the shares. The adjusted cost base of the land was $120,000 and, at the time of the transfer, it had a fair market value of $390,000. The transfer took place at an elected value of $120,000. As consideration, Jason received a promissory note for $60,000, preferred shares with a fair market value of $210,000, and common shares with a fair market value of $120,000. Which one of the following is the adjusted cost base of the preferred shares (first) and the adjusted cost base of the common shares (second)?

Option 1: $210,000 and $120,000.

Option 2: Nil and $60,000.

Option 3: $38,181 and $21,819.

Option 4: $60,000 and Nil.